US' Target's revenue grows 3.4% to $26.5 bn in Q3 FY22

Third quarter operating income margin rate was 3.9 per cent in 2022, compared with 7.8 per cent in Q3 of 2021. Third quarter gross margin rate was 24.7 per cent, compared with 28.0 per cent in Q3 of 2021. This year's gross margin rate reflected higher markdown rates, inventory shrink, and merchandise and freight costs, net of retail price increases, compared with last year.  Additionally, gross margin rate was pressured by increased compensation and headcount in our distribution centres and the costs of managing early receipts of inventory, with a slight offset from favourable category mix.

The company reported third quarter GAAP earnings per share (EPS) was $1.54, down 49.3 per cent from $3.04 in Q3 of 2021. Third quarter adjusted EPS of $1.54 decreased 49.1 per cent compared with $3.03 in Q3 of 2021, Target said in a media release.

Third quarter selling, general, and administrative expenses rate was 19.7 per cent in 2022, compared with 18.9 per cent in the third quarter of 2021. This reflected the impact of cost inflation across multiple parts of the business.

Target’s third quarter 2022 net interest expense was $125 million, compared with $105 million in Q3 of last year, reflecting higher average long-term debt and commercial paper balances. Furthermore, third quarter 2022 effective income tax rate was 21.6 per cent, compared with the prior year rate of 22.1 per cent.

The third quarter of 2022 was Target’s 22nd consecutive quarter of comp sales growth. Traffic increased 1.4 per cent year on year (YoY), while the basket size increased 1.3 per cent YoY. Furthermore, the company saw unit share gains across all five core merchandising categories.

The company paid dividends of $497 million in the third quarter pf FY22, compared with $440 million in Q3 FY21, reflecting a 20 per cent increase in the dividend per share, partially offset by a decline in average share count.

Target announced an enterprise initiative to simplify and gain efficiencies across its business, representing an estimated cumulative savings opportunity of $2 to $3 billion over the next three years.

Based on softening sales and profit trends that emerged late in the third quarter of FY22 and persisted into November, the company believes it is prudent to plan for a wide range of sales outcomes in the fourth quarter, centred around a low-single digit decline in comparable sales, consistent with those recent trends. Similarly, Target is now planning a wide range for its fourth quarter operating margin rate centred around 3 per cent.

“While we’re ready to deliver exceptional value for our guests this holiday season, supported by the decisive inventory actions we took earlier this year, the rapidly evolving consumer environment means we’re planning the balance of the year more conservatively. We’re also taking new actions to drive efficiencies now and in the future, optimising our operations to match the scale of our business and drive continued growth,” said Brian Cornell, chairman and chief executive officer of Target Corporation.

Fibre2Fashion News Desk (DP)